ECB cuts eurozone growth forecast

European Central Bank head Mario Draghi said the bank has cut its growth outlook for next year – but added that a gradual recovery should take hold by the end of 2013.

The bank now sees the economy shrinking by 0.3% in the 17 European Union countries that use the euro.

That is the midpoint of the forecast range for between minus 0.9% and plus 0.3%.

Previously the bank projected growth of 0.5%.

Mr Draghi spoke after the bank left its benchmark rate unchanged at a record low of 0.75%.

Mr Draghi also said he expects EU leaders to reach a deal “soon” on making the ECB the eurozone’s central banking supervisor.

EU officials failed to reach agreement on the proposal at a meeting earlier this week. Germany wants the new supervisor to oversee only the biggest banks, while France wants it to look after all 6,000 eurozone financial institutions.

Mr Draghi said he was “confident we will soon have an agreement” because “the benefits are not disputed”.

The single supervisor is aimed at keeping bank failures and bailouts from hitting the finances of national governments. That risk has been a key driver of Europe’s debt crisis.